Q4 2020 Conformis Inc Earnings Call
Ladies and gentlemen, please standby your conformance fourth quarter of 2020 earnings conference call will begin momentarily. Thank you for your patience and please standby.
[music].
Good afternoon, and my name is Josh and I'll be your conference operator today at this time I would like to welcome everyone to the conformance fourth quarter 2020 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Before we begin I would like to remind you that this.
The call will include forward looking statements within the meaning of the federal Securities Law, which are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995, and he statements made during this call and that are not statements of historical facts should be considered forward looking statements. These statements involve material risks and <unk>.
Uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward looking statements, including those discussed and the risk factors section of the form.
<unk> public filings with the U S Securities and Exchange Commission Accordingly, you should not place undue reliance on these forward looking statements and <unk>.
<unk> disclaims.
And any obligation except as required by lots of update or revise any financial projections or forward looking statements, whether because of new information future events or otherwise. This conference call will include time sensitive information and is accurate only as of the live broadcast today March 3rd 2021, I will now turn the call over to.
Mark of Augusta, the President and Chief Executive Officer of Conformance.
Thank you and welcome everyone to our fourth quarter and full year 2020 earnings Conference call with me on the call today is our CFO Bob Howe.
Like many other medical device companies conformance was materially impacted by the effects of COVID-19, and 2020 one.
The hardest hit from last March through the second quarter dipping to our lowest quarterly revenue number it's a public company and the second quarter of 2020 we.
We saw reason for optimism through the third quarter as electric procedures resumed fairly rapidly and this is carried into the start of fourth quarter. However, midway through November we experienced a resurgence of the negative impacts of COVID-19 across our business.
Although the hospitals, we're better prepared to handle the volumes of sick patients electric procedures slowed again as hospitals Red line that near capacities with Covid patients current and patients requiring emergency care the.
Number of CP scans slowed as did the number of procedures the others.
Pronounced impact was not as severe as it was and the second quarter of 2020, we again saw the knee and hip procedures slow down for us dramatically and.
And this has continued into Q1, although COVID-19 infection rates have begun to subside households are still dealing with limited bank capacity and procedure volumes have not returned to 2019 levels.
We believe that another COVID-19 related headwind has been orthopedic surgeons looking for shorter lead times between appointment booking and surgery because they have less overall demand for procedures right. Now. The result is that the lead time for personalized needs has worked against us of surgeons have been more likely to use and other solution to fill up openings and their near term schedules.
In addition has been increasingly challenging the gain new surgeons, because we believe that many had been deferring testing new technologies and products. During these times. This is particularly made training new surgeons on the conformance hit harder than usual.
Notwithstanding the effects of Covid, one thing that we believe has been reinforced over the past years that we of the right strategy for growth.
Like to take a moment and update you on each of the elements of our current growth strategy.
First our grow of course cemented personalize the business, we believe our needs of the best solutions for patients who need the replacements and wants to stay active our customer satisfaction scores remain high and our published clinical results are strong and continue to be strong and we continue to build and strengthen relationships with surgeons COVID-19 has slowed our progress of growing this business.
And as recently, but we feel there is the natural backlog of procedures building and patients will get more comfortable as vaccines become more widely available and we believe as elective procedure levels include this will directly improve our personalized core knee business.
The retailers to grow our hip business, we're still in the very early stages of growth of our hip business, while overall business was down and the fourth quarter and the year of hip business was up approximately 5% for the quarter and 26% for the year and addition in December 2020, we initiated our commercial launch of the compare of match hip system, we expect our hip franchise.
And the continued to become a significant part of our revenue base overtime, especially of surgeons further adopt new technologies attend in person training courses and the launch our next stem option in 2020 two.
Number three continue our R&D efforts and lots of new and differentiated products. We are currently developing two products, which we anticipate will move the needle for us. The most significant of course is our anticipated new standard knee offering which is being designed to provide of lower cost alternative to the hospital outpatient surgery centers and a S fees, while still taking full advantage.
And as you have years of patient data collected through our unique business model and we're confident that the new knee will launch and the second half of 'twenty 'twenty, one and believe it will be of materials game changer for US. We recently filed our five 10-K application with the FDA.
The other noteworthy product as our cement less knee progress is being made there too and late January sauce. Because you saw we are partnering with <unk> medical to use its technology and further strength of the suffering we plan on the launch of this product and Q1 2020 two.
Despite the negative impacts of Covid on our business, we made a strategic decision to continue investing and our R&D pipeline during the year and we're excited about the portfolio of new products, we plan to launch and the next few years. Indeed, we are in this position because we remain committed to new product development.
Number four continue to monetize our intellectual property and find strategic licensing arrangements.
This includes our Stryker relationship, which we believe validates the quality of our patient specific instrumentation and of our delivery model. In addition, this partnership provides us with and accretive long term supply agreement and we're near the end of the development process and the submission is currently being reviewed by the FDA. This is the last significant step and the development process and ones regulatory.
Clearance is received we expect to be the position to begin supplying streicher of course of the timing of when we will begin the initial shipments will be determined by Stryker.
Taken altogether, we believe we're out of the right path, which leads me. The one final update subsequent to year and on February 17th we closed on the 85 million of underwritten public offering we were thrilled that the demand for the offering and are pleased with the new investors, who are now connected to performance as well as those who increased their positions. We believe the quality of the investors that part.
<unk> demonstrates the attractiveness of of and the confidence in our strategy.
This cash infusion is significant for us we believe that it provides ample liquidity for us to execute our growth strategy. There are several significant areas, where we intend to use the capital and we believe putting the cash to use to grow business will build shareholder value that will more than offset the near term dilutive effects you can expect us to invest in R&D and new product development.
In mid 2020 for example, we added the side to keep either our new standard knee offering or cement less knee project on plan. Despite both being essential to our long term growth we chose to focus on the standard of knee because as I mentioned earlier, we expect it to be a game changer for us This capital infusion should allow us over the next few years not to have to choose.
Between two high quality and strategically important products for development.
In addition to new product development, and we expect to also make strategic investments to strengthen our sales and marketing efforts targeting the ASC space and.
And to reinforce our efforts to aggressively protect our intellectual property portfolio. We also intend to get started with some long term and game changer projects for instance, robotics is gaining interest across orthopedics with questions about the ultimate value of robotics and are not aware of any significant clinical results have been published which justify the ing.
Incremental cost.
We currently believe that nothing is better than of personalized implant. This recent capital infusion will allow us to proactively evaluate how robotics might complement our personalized approach to arthroplasty.
We feel we are of great vision for growth backed by a great team and a healthy balance sheet to make it all happen, let me day I'll turn the call over to Bob for a more detailed financial review of the quarter and the year up.
Thank you Mark and good afternoon, everyone.
There are a few financial topics I'd like to hit on and I'll start with the recent updates to our capital structure and cash management.
We finished the year with $28 7 million of cash and cash equivalents, which was up from the $26 4 million at the end of last year.
As Mark mentioned, we are pleased with our $85 million of gross proceeds from our public offering in February.
The operating with suggest under 81 million shares the price of $1 <unk> per share.
We believe that this infusion of the eliminates any financing overhang that had been pregnant.
This is especially important due to the continuing unpredictable nature of the pandemic and how long it will continue to negatively affect our business.
We continue to make good progress on our Stryker development project.
And we are still on track to achieve the last from me and milestone which is contingent on receiving FDA clearance of our application was received by the FDA and late January and as a reminder of the last milestone payment is $11 million.
In April 2020, we took out of $4 7 million dollar loan as part of the Paycheck protection program.
We believe we use the entire loan for eligible purposes as outlined by the U S. Treasury Department has all of the proceeds we used to fund qualifying payroll expenses. Accordingly, we recently filed an application for forgiveness of this loan and continue to believe the entire model will be forgiven.
Lastly, and with respect to our term loan with the Novartis.
We executed and new amendment to the agreement on March 1st that waves of the revenue covenants for the remainder of 2021 and lowers the revenue amounts that must be achieved in 2022.
We continue to enjoy a strong partnership with the Novartis and this new agreement acknowledges of the uncertainty that COVID-19 has inserted into our industry.
Moving to our financial highlights I would like to review the key results that mark and not cover.
We reported fourth quarter revenue of $16 7 million, representing a decrease of 16% year over year on a reported basis and 17% on a constant currency basis.
The fourth quarter product revenue was $16 5 million, representing a decrease of 16% year over year on a reported basis and 17% on the constant currency basis.
And of our knee products were $15 9 million, representing a decrease of 17% year over year on a reported basis and 18% on a constant currency basis.
Sales of our can form of hip systems was the <unk> 6 million and increase of 5% year over year on both the reported and constant currency basis.
U S product revenue was $14 4 million, representing a decrease of 16% year over year U S sales of our new products with $13 8 million of 17% decline year over year.
The rest of World product revenue was $2 1 million a decrease of 16% year over year on a reported basis and 22% on a constant currency basis.
For the full year of 2020, we reported revenue of $68 8 million, representing a decrease of 11% year over year on both the reported and constant currency basis two.
2020 revenue includes $9 6 million of royalty and licensing revenue from the settlement and license agreement with Zimmer Biomet, which was recognized and the second quarter.
Both revenue for the fourth quarter and for the total year, we're down from the prior year and below the expectations. We had not only at the beginning of the year, but also at the start of the fourth quarter.
Our revenue was challenged from Covid most of the year due to the volatility and reductions experienced in elective procedures and where.
We're pleased to see a strong correlation to improvement and our business as electric procedures rebounded, particularly and the third quarter.
We're working hard to ensure we are well positioned for when this happens in 2020 one.
Our fourth quarter gross margin was 47% of revenue compared to 49% of revenue for the same quarter the prior year.
The decrease in gross margin year over year was driven primarily by lower volume and canceled case inventory expense.
For the year gross margin was 49% of revenue compared to 47% of revenue and 2019 of 160 basis point increase which was driven by the $9 6 million licensing revenue recognized as the result of the settlement and license agreement with Zimmer Biomet.
Full year of 2020 product gross margin was 43% of revenue compared to 47% and 2019.
And 400 basis point decline.
The decrease in gross margin year over year was again, primarily due to lower manufacturing volumes and cancel case inventory price.
Operating expenses for the fourth quarter were flat year over year and for the full year of 2020 were down 5%.
We continued to maintain our investment and our R&D pipeline throughout the year, despite the headwind headwinds and our top line and we made selective reductions and marketing expenses travel and entertainment and other discretionary spending to minimize the impact on our cash burn.
Last year, we began to build the presence in India to support our CAD manufacturing design activities as well as for several of their current or planned corporate functions, including regulatory clinical and software design development.
This was done to attract top talent and the benefit from identified cost savings opportunities.
We expect to continue to ramp of our number of employees in India to support both our Stryker launch as well as the anticipated growth and our knee and hip product lines. The.
India investment will support our efforts to improve gross margin and as part of our long range strategy to reduce the cost of our products.
Lastly, I would like to provide some thoughts on our outlook.
Last March we suspended our practice of providing full year guidance due to the heightened level of unpredictability and volatility caused by Covid.
Although the environment has not stabilized enough for us to resume providing full year guidance, we were and are positioned to provide insight into what do we expect for the first for revenue and the first half of the year.
Historically, we see a drop and the first quarter compared to the preceding fourth quarter and as many health plans reset on January one.
And to add to that the continued pressure and we.
Experienced from elective procedures. So far this quarter, we expect our first quarter product revenue to be and the range of $13 million to $14 million.
We believe this pressure will continue through the second quarter, but then we may see electric procedure volumes improve and Q3 is the vaccines become more widely available.
With that let me turn the call back over to Mark.
Thank you Bob.
All of the depth 2020 was a challenging year. However.
However, as I take a step back I realize we have reason for optimism as we head into 2020, one and beyond first and foremost we have a great team of conformance that stood together through a very challenging year, we continue to work together positively and respectively and the support each other personally and professionally we are battle hardened and ready to win we believe that we have.
The best and most differentiated knee and hip replacement portfolio and the world and that our personalized products to deliver optimal results for doctors and their patients our pipeline of new products is strong, including our new standard knee offering, which we believe will be a game changer for us as I've said before and will help us and evolve our business model lastly, with the close of <unk>.
Stock offering a few weeks ago, we know of the capital flexibility to drive this growth strategy.
And we'd like to acknowledge and thank all of the conformance employees consultants advisers customers and shareholders. He helped make conformance grade we believe that what we do is important and can be life changing for patients and theres no value you can put on being able to be active without pain, we never take for granted and work hard every day, our patients and our doctors. Thank you.
With that Bob and I are happy to take questions I'll turn it back over to the operator.
Thank you as a reminder to ask a question you will need to press star one on your telephone.
And final question press the pound.
Keith Please and while we compile the Q&A roster.
Our first question comes from Robbie Marcus of JP Morgan You May proceed with your question.
And thank you for taking the question and.
Hello and.
So I just wanted to try and pin down the commentary and second quarter as well.
And we hear a lot of other med tech companies the ranges from a conservative to a more optimistic outlook and I think it's appropriate to stay conservative at this point, but do you think you could grow sequentially off of first quarter and by what sort of magnitude and then <unk>.
And how are you thinking about expenses going into 2021, and I realize you probably held back on a lot of expenses you want to invest and growth how should we think about that maybe and first second and and if you could opine on on the year at this point. Thanks.
Why don't I take the expense piece and then you can think of it because I do think there's a chance for Q2 sequential but I'll, let you look at the numbers. So we're having some really good question.
And in particular and reverse order.
And we plan and giving more color on our thoughts about expenses and opportunities for growth.
Going forward, especially probably on the first quarter call, but potentially even before that.
So we're still in the throes of doing that we have not we did not.
Materially expect to change our expenses.
At this point, but we are going to look for targeted opportunities to support the sales and marketing efforts to our product launches. So we're starting to put those plans together, which this capital of use and allows for.
As well as we're pretty excited about some some projects that were sort of on the drawing board that we can bring in and potentially bring in more revenue and do a long range plan.
But we want to be able to answer that with more color for you and so we need a little bit of time to be more thoughtful about how that's going to roll out. So we expect that there would be some potential of our incremental spend.
Especially starting sort of in the second quarter and through the half I mean, but but we havent started spending and those monies certainly right now and don't expect the change that you know.
And immediately.
And Bob why don't you yeah yeah.
The staff.
Yes, I mean, I think there is like Mark mentioned I think there is opportunity because we still have time as you know we've got of lead time with scans. So scan start returning and I think there is the opportunity to grow sequentially right now our guidance and it's going to be similar.
It all depends how quickly things kind of turnaround with the scans I mean, clearly growth rate right because of the comparison versus two two and Ravi just to make sure. We're outside of the same thing, but I think your question implicit I want to make sure of is that the dollar volume would grow from Q1 to Q2, and we do we do sort of see that.
There's no doubt that theres been a decline in procedure volume and let's just all remember that January and February 'twenty were actually strong months for us and I think for the industry overall.
So we have seen sort of a.
The flattening if you will of where procedure volumes are at and as we get into as we get into the second quarter I do think there'll be opportunity for sequential dollar volume growth and clearly the growth rate will be improved over prior year for sure.
Yeah, no I definitely meant dollars.
And I, certainly hope the year over year growth rate of positive not sure yeah.
And maybe just to put a finer point on it you did $15 5 million and in Opex and fourth quarter and how do we think about what that looks like and first quarter and then last from me with.
With the new the.
The new knee product, how do we think about that layering in to 2021 sales. Thanks.
One of you do the and you want.
So and I'm not sure how much guidance, let me give the GM general thoughts about the opex, but the but look the knee is critical for us and obviously.
We have to get the clearance and then we have to execute and do that but I think thats the biggest opportunity for unknown.
We sail into good procedure volume and vaccines are out there and things are good and we don't have ex pickups and obviously the execution.
I think that will materially change, what we call our orders rate and where we're at because it's targeted.
And we think we've got the right value proposition for the growing agency space I can tell you that there is a lot of excitement of activity. We're working every day with surgeons and anticipation of this launch and where we want to go so.
I don't know that were ready to tell you exactly how much color and detail, we'll give for you but that is a key source of growth for us and the real thing is like anything else with any new product as is.
The execution rate and the ability to penetrate and train and get people up and running and that's going to be a little unknown for us because of these variables there.
And the second half like when can the tracks and start like I think implicit in your question is could we see it in Q3 or is it more of a Q4 and and there's just.
It just depends right on where we execute those things.
And I think we definitely should start to see stuff and Q4, there is a chance for some Q3 and what I like is that we're as I. Just we just disclosed we are in front of the agency now so that gives us the opportunity to be at the leading edge of the second half timeframe that we've given which gives us more of 2000.
And 'twenty to get traction with the new product Ravi.
And if we can again, it's all about execution, but and.
Till we have that clearance and we get to the market, it's still a little uncertain.
Great. Thanks for taking the questions alright. Thank you.
Okay.
Thank you and your next question comes from Josh Jennings with Cowen You May proceed with your question.
Hi. Thank you. This is Eric on for Josh I, just wanted to touch on your announcement from January around the supply and development agreement with the sites medical and I was just wondering when we could hear updates on development progress from that partnership and also I just want to make sure that incorporating the technology from sites is and impacting your timelines for the cement less knee offering.
No Eric.
Hi, and thank you for the question, yes, I should probably clarify that as well we have been working with sites for a while.
And it just wasn't until we reach certain milestones or or retired certain technical risks that we felt comfortable it was time to you.
Make more of a public announcement around that so.
And that's been the lead technology that we had been working on for a while and so.
To be clear everything was consistent about announcing that and consistent with what we're saying about some atlas launching by Q1 of 'twenty 'twenty two so nothing changes there and as we progressed that program.
Certainly we'll provide more updates we recognize is we've been very transparent that some atlas's.
And important and growing segment in total knee arthroplasty and the nice thing about the capital raise is it sort of shores up and reinforces our ability to continue to pursue that and potentially we're exploring and even potentially.
And if there's opportunities to increase that timeline, but we just we just are not working on that we're also and the throes of finalizing obviously, the ASC knee so more to come on that but.
Just want to clarify that there was nothing new or you shouldn't take anything and the interjecting any risk and that announcement that we've been working with sites all along and that was always part of the program.
Understood. Thanks for clarifying that and then looking at your opportunity internationally.
You saw your recent high total approval in Australia are there any other markets that you think we could see regulatory progress or approvals and the near term.
Yes, we're actively pursuing.
Couple of the markets, we've talked about that particularly some of the larger markets in Asia.
So I would think you'll see those announcements as they happen we put out the goal out there too.
Two.
Improve the growth rate of our international businesses.
And unfortunately due to the reimbursement changes had been a headwind for a while and for people that follow us we've talked about that so the key to getting international growth turned around and.
As COVID-19 to settle down but then it is to get these new markets open up and what I like about the Australia announcement is it just shows that we are actively pursuing this with the TARP.
The markets we've targeted.
We're going after so.
Yes, you can expect more to come.
Yeah.
Great. Thank you for the questions.
Thank you.
Thank you. Our next question comes from Steven Lichtman of Oppenheimer and company. You May proceed with your question.
Thanks, Hi, guys.
Mark with the with the Stryker launch expected to come here and the coming months, what are your thoughts as to what percentage of strikers U S knees could.
Could potentially be used in conformance with tsi.
As you look out over the next few years.
Well first off Steve Let me, let me be clear hopefully and we expect that we should be able to get FDA clearance and quote the coming months, but.
I just wanted to reiterate it's up to our partner to the side the commercial execution and I don't.
I want to speak for them so.
And that's up to them, but I am very much willing to talk about percentage you know this this model and we think we've got the best in class.
Surgery and the box model for total knee arthroplasty, we've got the best James that execute this and the best software.
And as I've said publicly I think the partnership with Stryker and quality company validates that and we're excited to be able to help them achieve of vision of that for their travel and implant youre asking of really good question what percentage of their models out there. The suggests by 2024, 40% of total knee arthroplasty.
It could be done and an outpatient setting.
So you tell me I don't know what that penetration will be and strikers hands and with their marketing effort.
I'd like to think they'll put as much effort behind it as they've done with robotic surgery and everything else the.
The thing Steve the.
I'd like people to recognize there's nothing about the agreement limits the trapped line and a box to the outpatient surgery Center clearly it's.
Most of you know most effective there because of all of the issues, we've talked about with the sterility resources and space resources, but this absolutely could be done.
Inpatient as well and I think in the environment. We're in all of US that are players and this are looking for validated and efficient delivery models and solutions that take cost out of the system help make the more predictable procedure and those types of things and that's what our software and knee and the box does so.
It just it depends on the assumptions you make about penetration for and ramp rate of outpatient knee surgery and the penetration of P. Aside to that site of care as well as some assumption around the penetration of of that delivery model into the inpatient side of care. So I don't want of has.
And sort of gets but.
I'd be disappointed if it wasn't it wasn't more than five or 10%, let's say if I had to put something out there, but and I think we've we've put some ideas out there of what we think it could mean to us for revenue by 2024.
And that has helped that's helpful color. Thanks Mark.
And you also you mentioned the difficulties and launching of new products like like camp during Covid.
Wondering what you're hearing on the ground in terms of receptivity of the product and your thoughts in terms of sequential ramp.
Once the Covid, obviously, hopefully starts moving into the view of being there.
Yeah Yeah.
So it really has put a put a crimp on you know.
The willingness and ability to do these things, but having said that we have adopted some virtual technologies and we've done virtual trainings and Webinars and I can't say that we're very excited we just did.
Our Florida based.
Medical education and person of course with also virtual attendees and we trained nor.
And north of 20, surgeons and that which you know.
And it's pretty good and person numbers for for this.
This environment.
We're we're actually having a discussion with our advisors later this week to to really sort of think about when can we turn on the gas on and you know now that gives you kind of remember rightfully like many of our physicians have now gotten their vaccines rights of the vaccines are permeating, we're seeing travel.
Frictions, you know people are getting more comfortable so the question for us is.
You know, what's going to be the level playing field and.
And we're thinking where everything is going to level out.
And just going a lot some type of virtual education or some some type of something more of local without the travel or are we going to get back to you know the tried and true method of peer to peer and where we're at and unfortunately for new products.
We think the peer to peer thing is really important and so.
So we really got to make that happen and and continue to support that.
But then have the ability to supplement with virtual so we'll do that and.
And I think we will.
Once the procedures level and this gets out I really do think we can get back to sequential growth and our hip it's as I said in my prepared comments, it's a critical component of growth for the company.
And we love the model that we have we love the the plan to add more stem options. So that we can continue to increase our addressable market within the hip replacement market.
But this this this headwind of training as it was the real thing that we have to just push through.
Got it.
And just lastly, Bob gross margin in 'twenty, one just sort of Directionally. If you could how should we be thinking about and it's <unk> and then sort.
For full year relative to what you guys did in the back half of <unk>.
Of 2020 at that kind of gets 46, 47% range.
Yeah.
Yes.
And I'm, probably not comfortable of his point with full year, you know kind of like one of the revenue piece of it but Q1 I can give you some some color right. So nothing.
We have the numbers, but I would say we came in at 40 total gross margins part of growth product gross margin was 46 for the for the fourth quarter.
Given the decrease in volume sequentially that will pull that number down I would have to say it's probably.
Ooh 43 to $45 46 in that range all depending on.
We've canceled cases and inventories that the little hard to predict but it's.
Probably in that range based on that volume.
That's the color I'd give you and the.
Okay makes sense thanks, guys.
Thank you. Our next question comes from Kyle Rose with Canaccord. You May proceed with your question.
Great. Thank you for taking the question.
So I just wanted to ask a little bit more about what youre seeing with respect to the marketing and the in the Q1.
And I understand the commentary with respect the guidance I appreciate that but you do have a lead time as far as scans coming and so maybe just help us understand maybe how the scanned trends have have trended.
Through.
And the first eight weeks first two months of the quarter and what that is kind of telling you on a week over week month over month basis, when you think about it.
Entering the queue to just trying to understand how we should think about that quarter over quarter dynamic here right. So it's not so.
Well I'll give you more of my thoughts around Q1 and.
Q2, youre, giving us a little too much credit and credit about or if you guys aren't that far out little crystal ball and and so there's a couple of things going on first office.
What we've seen and why it's been harder to truly predict our business through our old.
Models is that the pace of rescheduling is serious and and you think about re schedules.
Not as easy it used to be because these patients are clear of the COVID-19 clear the got the negative test and got the other stuff and then all of a sudden.
They've got a reschedule and it puts more burden on the healthcare team and it's different it's not as easy as it used to be sort of the pace of reschedule and has changed and what that means calls usually are scheduled backlog, which we do have as you pointed out visibility too.
And is very very.
Predictable and it's gotten.
Crazy Crazy, but less predictable on the mark until the spin Heartland and what I will tell you is we've been pretty actively like I'm sure everybody and you guys as well looking at.
The volume of elective surgery, not just sort of the Phoenix, but elective surgery across health care and looked at office visits and tried to look at in person visits versus telehealth and.
And the problem with Orthopedics is you can't really do a surgery and without an in person visit because they have assessed the knee and assess the patient physically so it's possible, but it's not tried and true and many surgeons don't feel of carnival. So so when we look at those numbers right there down versus Q1, and 2020, because don't forget <unk>.
And in February we are actually pretty good months, they worked for us and they work for the industry volume. So the simple fact is.
We fundamentally have the physician the actual you know knee arthroplasty volumes and the U S have not certainly not back of 2019 levels in Q1, because there's just not we've got you know through the first eight weeks of 'twenty 'twenty, one all of the reports of suggesting those metric.
Ex on visits and elective procedures are down.
<unk>, 25% pick up in the quarter I see it as a kind of 20% to 25%.
March is unclear to us, but it looks like March is going to continue because there is no doubt as we talk to our surgeons that their schedules and their backlogs are reduced and later because plenty of patients have put off surgery and it's.
Particularly new patients the new patient volume is down and they've put off surgery of their weighted so Q1 is going to be challenged and thus why do we see our stuff and I think it's gonna be and industry thing personal view as far as Q2.
It's still uncertain and I haven't seen anything to suggest and it's not like we are of great Crystal ball sector, the materially changed but I do think it's the opportunity to execute two stronger then we go into Q2, because you got the summer months, you've got vaccine continue to grow we just heard of the administration and talk about having every adult vaccinated by May right.
So those types of things start to happen and we can get the the where the patients back then we had the chance to come up office, Florida that I think we're at in procedure levels and continue to get the.
The growth back in new patient demand and so so that's what we're seeing and I think if you track our performance.
We've been slightly worse, because we've talked about primary only and in it.
Our portfolio is more at risk and we don't have.
Revision and we don't have other stuff like that but.
And we haven't been that far off the market. If you just do the analysis of where the market has been and I think I think that that's what we're seeing for Q1 as well and don't forget Q1 also was impacted by what like at least three days, but potentially the whole week of of weather related stuff and it goes back to reschedule, there and it's hard to reschedule.
All of that business in the Covid environment. So that's really the impact from an industry perspective for Q1 arthroplasty.
Okay, I appreciate that and I want to add.
Ask a follow up to Robbie's question.
When you think about new products. This year, you launched coronary match and towards the end of last year you of.
Got the the.
The ASC and the coming in the second half you've got the the Stryker and relationship.
At some point this year.
How should we think about contribution from new products.
In 2021, and then I'll ask my second question now as well as you know you talked about robotics and exploring opportunities. There can you just kind of let us know what that means.
The home robot are you looking to partner with others like what does that mean.
Yeah, Let me I'll spend more time on that because that's the fun stuff but.
Look the first thing is is.
I don't think were prepared to tell you exactly rather than just give us the chance to get some of these FDA clearances and move forward and I think we owe you some thoughts about how we will talk about that and how we will talk about uptake of new products and we'll come back to you on that with the more thoughtful answer.
Certainly haven't models, but I don't think we're ready to give that level of detail color.
And and we've got a wide target here.
And I'm very very bullish about what we're doing with our <unk> I hope. The fact that we've submitted the dossier to the FDA gives you the sort of proof point that while they really have made progress on this and the <unk>.
And so so there's a lot of good stuff there, but we still have to execute and start to get the clearance and get going commercially and don't forget for conformance. This is the world change like our surgeons are really really excited we know that we're on the right track because there is growth and the ASC, but surgeons need to see and touch and feel and they want they are asking.
A lot of good and interesting questions and we.
We have to execute on that.
Robotics is a real interesting question I mean, clearly is the smaller company the idea of the conformance.
And frankly price of the rate certainly even more capital constrained and smaller company the idea that we could be.
Our lead around robotics, I think wouldn't have made strategic sense and so we didn't choose to pursue that I've said publicly that we want to be.
First the fast follower and see how it plays out as I said in my prepared remarks.
It's not clear to me that there is a clinical and health economic rationale here I mean, I understand the hypotheticals, but they're not there yet there is no doubt that he has been made with the marketing of it.
But we are about the ASC and worry about outpatient and my view is at least today other than certain places that can afford it and most of the robotics is being targeted to the inpatient. So the question for us and what now this capital raise and allow us to do Theres a lot of different technologies and potential partners out there theres a lot of advancement.
And and pursue robotics through likely through partnerships and development opportunities.
And so we're going to proactively look at that I mean, the you know we've always thought and felt that.
Really need solution would be a robotic personalized solution. So we could replace jigs and the cost associated that and have real time, and our operative planning and whatnot. So.
We're going to you know.
Use the the capital that we've got on hand now to actually.
Explore that and so we will as always as we think.
And thinking about what that program might look like if we are going.
The change R&D spend and any material way, we'll talk about that we're going to be prudent and as.
As well as soon as we're thinking about something we're ready to discuss something and you know well.
Put it out there as part of our new product roadmap.
Great. Thank you for taking the question. Thanks, Scott good questions I appreciate it.
Thank you and I'm not showing any further questions. At this time I would now like to turn the call back over to Mark The best day for any further remarks.
Okay.
No further remarks, so I just want to appreciate everybody for attending the call. Appreciate the questions. Thank you operator that concludes our call.
Thank you ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.
The.
Yes.
[music].
And then.
Yes.
And.
Moving forward.
[music].